Morningstar cements Sustainalytics relationship with 40% stake

August 6, 2017

Heather Brilliant: former Morningstar CEO Australia and NZ

Morningstar Inc, which has been increasingly including ESG concerns in its research and ratings over the past few years, has cemented a “strategic collaboration” with Sustainalytics, a global ESG research firm, through the purchase of a 40 per cent interest in the company.

Chicago-based Morningstar was instrumental in bringing Sustainalytics to Australia and New Zealand, as a big client, in early 2016, when the Dutch-based firm opened its first office in the region – in Sydney. Colonial First State Global Asset Management was also an international client prior to the new office. The Responsible Investment Association Australasia became its first “member” organisation in the region.

Sustainalytics, which this year celebrates its 25th anniversary, covers more than 4,500 companies globally through its ESG and corporate governance research. Its “Controversies Research” highlights ESG risk across a worldwide universe of more than 10,000 companies. Catalina Secreteanu is head of the Australian office.

The strategic collaboration between Morningstar and Sustainalytics, which enables the ratings house to include a broad range of ESG principles into its fund and stock research, was announced in August 2015.

In March last year Morningstar launched its global ratings for managed funds and ETFs. In October last year Morningstar launched its “Global Sustainability Index Family”, which currently involves 27 indices designed to provide an investor standard for sustainable investing. Most recently, in April this year, Morningstar launched its company-level metrics for mutual funds, so investors can screen for themselves their funds’ performance on ESG matters.

In a statement, Morningstar said that several senior Sustainalytics executives would also be purchasing shares in the company and Morningstar’s Steven Smit, head of sustainability, would be joining its board. The terms of the deal were not disclosed.

Kunal Kapoor, Morningstar’s chief executive, said: “Enhancing this relationship enables us to leverage the expertise Sustainalytics has built over the last 25 years, and build on the momentum we started with the launch of the ‘Sustainability Rating’.

“We have the largest ESG fund coverage universe today, and we look forward to continuing to meet the increasingly sophisticated ESG needs and requirements of our clients through integrated solutions and innovative research that highlights good stewardship, lower costs, and transparency for investors.”

Kapoor, a long-time researcher and client solutions executive at Morningstar, was appointed chief executive in January this year, replacing Joe Mansueto, the founder, who remains executive chair and the majority shareholder.

Meanwhile, in Australia, the chief executive, Heather Brilliant, will leave the organisation next month to join Colonial First State in New York, as head of the Americas. The new Australian chief executive is Jamie Wickham, who is currently Asia Pacific head of products and solutions.